UPDATE: Euro-Zone Economic Output Slump Eases Further In July

UPDATE: Euro-Zone Economic Output Slump Eases Further In July (Adds data, Markit and economist comment) By Nicholas Winning Of DOW JONES NEWSWIRES LONDON (Dow Jones)--The contraction in euro-zone economic output eased to its weakest rate for 11 months in July, fueling hopes that the 16-nation currency area could emerge from recession before the end of the year, data from Markit Economics showed Wednesday. The final reading of the euro-zone composite output index -a closely-watched gauge of economic activity -rose to 47.0 in July from 44.6 in June. The headline figure, which combines both the manufacturing and services sectors, remained below the neutral 50.0 level, indicating that output has contracted for a 14th consecutive month. A reading below 50 indicates a drop in output while a reading above indicates an expansion. But it was higher than the flash July reading and the market consensus estimate of 46.8 from a Dow Jones Newswires survey of economists. "This will raise hopes that the euro-zone economy could stabilise in the second half of the year, led by manufacturing, where production recorded only a marginal fall in July," Chris Williamson, chief economist at Markit, said in a statement. "Services continue to lag, however, largely due to weak domestic consumption as employment continued to fall, which will most likely act as a drag on any recovery," added Williamson. Markit said the services business activity index rose to a nine-month high of 45.7 in July from 44.7 in June -beating economists' expectations of 45.6. The purchasing managers' index for the manufacturing sector which recovered to an 11-month high of 46.3 in July from 42.6 in June. "To put this level of the composite PMI into context, it is consistent with gross domestic product contracting by around a quarter of a percentage point quarter-on-quarter on the basis of past relationships," Ken Wattret, an economist at BNP Paribas, said in a note. Euro-zone GDP posted a record 2.5% quarterly contraction between January and March. On an annual basis, GDP fell 4.9% in the first quarter. Germany saw the weakest drop in output of the big four euro nations in July following a record jump in its composite index to its highest rate since September. By contrast, France saw an increased rate of decline in July following four straight months of easing. Euro-zone employment continued to fall, but at the weakest rate since January, Markit said. Manufacturing continued to report a steeper rate of job cuts than in the services sector. Incoming new business posted the smallest deterioration since last August. Rates of decline slowed sharply in Germany and Italy and eased marginally in Spain, but France saw a slight increase in the rate of loss of new business. -By Nicholas Winning, Dow Jones Newswires, +44 207 842 9498; nick.winning@dowjones.co Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=py6XKysBWxRFQBX8LswcYA%3D%3D. You can use this link on the day this article is published and the following day. (END) Dow Jones NewswiresAugust 05, 2009 05:29 ET (09:29 GMT)Copyright 2009 Dow Jones & Company, Inc